German Producer Prices Fall the Most in 22 Years
German April producer prices fell 1.4% m/m and 2.7% y/y, much weaker than expected and with this the sharpest annual decline in 22 years. The breakdown showed that energy prices remain the main driving factor with prices down 4.0% m/m. Energy prices fell 4.4% y/y, with prices excluding petroleum down 1.5% y/y. Data highlight the extend of short term downward price pressures that are likely to push CPI also into negative territory in coming months. However, base effects should turn negative again in H2 and as long as inflation expectations remain in line with price stability the risk of wide spread deflation is limited for now.